Manufacturing Recovery Myth Response

In response to my article "No, Virginia, Manufacturing Isn't Dead [1]" Mr. Scott has published as article titled "The Myth of the Manufacturing Recovery. [2]" Regrettably, his rebuttal is deeply flawed both in tone and substance.

First, he notes that I plotted a non-logarithmic chart of productivity growth instead of a logarithmic one, the implication being that a logarithmic chart would somehow arrive at a different conclusion. Of course, the first question a reader of Mr. Scott's article should ask is, "if this chart is so damning, why did Mr. Scott not include it is his article? The answer is clear: the chart in logarithmic scale and normal scale show the exact same situation: a chart that shows a clear expansion of US manufacturing output. See this on page 5 of the complete PDF's from the Federal Reserve. [3] Secondly, according to the Federal Reserve, growth in manufacturing output did not decrease after 2000 as Mr. Scott claims. According the same source (the Federal Reserve's industrial production chart), manufacturing output increased from 2000 until the end of 2007. At the same time, manufacturing jobs dropped. This contradicts the root of his argument – that there was somehow no growth in manufacturing from 2001-2007. This is simply not true according to Federal Reserve data.

Next, Mr. Scott notes that my co-blogger and I used a chart of manufactured imports and manufacturing jobs compared same to to demonstrate there is no relationship between the trade deficit and manufacturing employment. What Mr. Scott fails to recognize is this: if the US were replacing manufactured goods produced in the US with manufactured imports from other countries, there would be a relationship between imports of manufactured goods and manufacturing jobs. Yet as the US started to import more manufactured goods there were not a concomitant decrease in employment jobs. In fact, during the latest recession, the pace of good’s imports decreased substantially (meaning the US was importing far less) yet at the same time manufacturing jobs decreased at an accelerated rate. In addition, my co-blogger Silver Oz demonstrates this lack of causal relationship between the trade deficit and manufacturing in this article, titled, Free Trade Is Not the Job Killer. [4]

Finally, consider this graph from the St. Louis Fed’s system

[5]

As Silver Oz notes:

Let's examine this a bit further. From the end of the 1990 recession to the pre-2001 recession peaks productivity was up about 47%, industrial production was up about 61%, and goods employment was up about 9.3% (I used the end of 1990 recession value and not the trough in actual goods employment here). So during the 90s, production outstripped productivity (although both were up a ton), while job creation came in at only +9.3%, obviously lagging. However, from their 2001 recession troughs (again using the end of the recession for jobs), productivity was up about 25%, industrial production was up about 15%, and jobs declined by about 4.3%. This graph demonstrates that when productivity outstrips production goods jobs decline, but that even when production outstrips productivity job growth can be anemic so long as the productivity growth is still substantial. The current recession is showcasing productivity's effects on jobs very well, as while production has dropped about 13% during this recession, productivity is actually up over 5%, and industrial production is now at it's 2002 levels, but with roughly 20% fewer workers making those goods.

In short, while I appreciate Mr. Scott’s rebuttal, the facts do not support his theory.